HOTREC calls on Online Travel Agents to promptly abandon parity clauses from their hotel contracts
(Brussels, 3rdDecember 2013) "Most favoured nation clauses" (MFN), or clauses on rate, availability and product parity, are widely used in the general terms and conditions of Online Travel Agents (OTAs) and, being in contravention of EU laws, are rightly treated with suspicion by more and more antitrust authorities in Europe. "OTAs must promptly agree to amend terms of business to void existing MFN clauses across all agreements where such clauses exist. Further, OTAs should forego future use of the clause in new agreements. Failure to fully remove the effect and use of these clauses will force HOTREC, among others, to call for legal action by national or European competition authoritiesto restore entrepreneurial freedom, legal certainty and prevent further economic damage," pointed outKent Nyström, President of HOTREC.
In the recent months several competition authorities across Europe have explored or investigated MFN-clauses as used by OTAs in the hotel online booking sector, for instance in Austria, France, Germany, Hungary, Norway, Sweden, Switzerland, and the United Kingdom. Some of these proceedings seem to be at an advanced stage and publicly available information strongly indicates that MFN-clauses as used by OTAs in the hotel online booking sector are generally considered as being in violation of national and EU competition law and are therefore illegal and void.
For instance, in its second statement of objections against the leading OTA in Germany "Hotel Reservation Service Robert Ragge GmbH" of 25thJuly 2013, the German Cartel Office has confirmed its previous competition concerns in respect of the MFN-clause used by the OTAs. It found that MFN-clauses only seem to be to the benefit of consumers at first sight. In reality, however, they hinder competition for better offers between OTAs by virtually eliminating competition for lower room prices between them. In addition, MFN-clauses make the market entry of new suppliers offering innovative services considerably more difficult as these new competitors are not able to offer hotel rooms at better rates. In addition, the German Cartel Office found that MFN-clauses also restrict competition between the hotels because hotels are not free to set their prices independently and cannot respond flexibly to new competition developments.
The French Commission of Commercial Practices has also issued a first opinion, stating that MFN-clauses are void and unlawful since they imply an automatic alignment with the most favourable conditions granted to competitors. On the basis of this opinion, the French government sued Expedia in front of the commercial court.
If MFN-clauses are promptly abandoned from all contracts of OTAs, competition will be renewed in this valuable market place, from which the customers will benefit at the end.
For the above same reasons, HOTREC had already called upon the OTAs to abandon the use of MFN-clauses relating to rates, conditions, and room availability in its "Benchmarks of Fair Practices in Online-Distribution" of 27thApril 2012, without any measurable effect.
"HOTREC is not willing to accept any longer that the entire hotel industry in Europe can be deprived of their entrepreneurial freedom and suffer economic damage, because of a likewise anti-competitive and unfair behaviour by OTAs using MFN-clauses", commented Markus Luthe, chairman of the HOTRECTask Force Digital Distribution and member of the Executive Committee of HOTREC.
What is HOTREC?
HOTREC represents the hotel, restaurant and café industry at European level. This industry includes around 1,8 million businesses, of which 99% are small and medium sized enterprises (91% of them micro enterprises, i.e. employing fewer than 10 people). These businesses make up some 59% of industry value added. The hospitality industry provides some 10.2 million jobs in the EU alone. Together with the other tourism industries, the sector is one of the largest industries in Europe. HOTREC brings together 43 national associations representing the sector in 30 different European countries.